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Question 1: Silver Bullet Train is planning to acquire a new Engine. The current market value of the Engine is $210,000, and the engine can
Question 1: Silver Bullet Train is planning to acquire a new Engine. The current market value of the Engine is $210,000, and the engine can be used for 8 years. They have two options. Option A: They can lease the engine from Sky Motors Inc. who has agreed to lease the engine for 8 years at an annual lease payment of $38,000 (the first payment has to be made at the beginning of the period) Option B: They can get an 8-year, 12% interest loan of $210,000 from Nordic bank. The loan is to be paid-off in eight equal annual instalments (Payments will be made at the end of each year). The useful life of the asset for tax purpose is 6 years. The company follows a straight-line depreciation method. The engine has a residual value of $20,000. If the company pays 40% tax, which option should the company choose? (15 Marks) Question 2: When you were born, your dear old Aunt Minnie promised to deposit $1,000 in a savings account for you on each and every one of your birthdays, beginning with your first. The savings account bears a 6 percent compound annual rate of interest. You have just turned 25 and want all the cash. However, it turns out that dear old (forgetful) Aunt Minnie made no deposits on your fourth, eighth, and eleventh birthdays. How much is in the account now - on your twenty-fifth birthday? 15 Marks] Question 3: You have just bought a home for $600,000. You took a loan from the bank to make this purchase and you have to pay back the loan in 25 equal installments to be paid annually. The first installment is due one year from today. How much interest will you be paying over the life of this loan if the interest rate is 5%? [3 Marks) Question 4: Determine the annual percentage interest cost for each of the following terms of sale, assuming that the firm does not take the cash discount but pays on the final day of the net period (assume a 365-day year): a. 1/20, net 30 b. 2/15, net 45 c. 2/30, net 60 d. 3/10, net 30 14 Marks) Question 5: You have decided that you will sell off your house, which is currently valued at $250,000, at point when it appreciates to $400,000. If houses are appreciating at an average annual rate of 3% in wour neighborhood, for approximately how long will you be staying in your house? (3 Marks) Question 1: Silver Bullet Train is planning to acquire a new Engine. The current market value of the Engine is $210,000, and the engine can be used for 8 years. They have two options. Option A: They can lease the engine from Sky Motors Inc. who has agreed to lease the engine for 8 years at an annual lease payment of $38,000 (the first payment has to be made at the beginning of the period) Option B: They can get an 8-year, 12% interest loan of $210,000 from Nordic bank. The loan is to be paid-off in eight equal annual instalments (Payments will be made at the end of each year). The useful life of the asset for tax purpose is 6 years. The company follows a straight-line depreciation method. The engine has a residual value of $20,000. If the company pays 40% tax, which option should the company choose? (15 Marks) Question 2: When you were born, your dear old Aunt Minnie promised to deposit $1,000 in a savings account for you on each and every one of your birthdays, beginning with your first. The savings account bears a 6 percent compound annual rate of interest. You have just turned 25 and want all the cash. However, it turns out that dear old (forgetful) Aunt Minnie made no deposits on your fourth, eighth, and eleventh birthdays. How much is in the account now - on your twenty-fifth birthday? 15 Marks] Question 3: You have just bought a home for $600,000. You took a loan from the bank to make this purchase and you have to pay back the loan in 25 equal installments to be paid annually. The first installment is due one year from today. How much interest will you be paying over the life of this loan if the interest rate is 5%? [3 Marks) Question 4: Determine the annual percentage interest cost for each of the following terms of sale, assuming that the firm does not take the cash discount but pays on the final day of the net period (assume a 365-day year): a. 1/20, net 30 b. 2/15, net 45 c. 2/30, net 60 d. 3/10, net 30 14 Marks) Question 5: You have decided that you will sell off your house, which is currently valued at $250,000, at point when it appreciates to $400,000. If houses are appreciating at an average annual rate of 3% in wour neighborhood, for approximately how long will you be staying in your house
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